Suppose Option a Has a Higher Variance Than Option B

question 18

Multiple Choice

Suppose option A has a higher variance than option B.Which of the following statements is, in general, true?

• A)A risk neutral person is indifferent between options A and B.
• B)A risk averse person prefers option B to option A.
• C)A risk averse person prefers option A to option B.
• D)Insufficient information to determine.

---

Definitions:

S&P E-Mini Futures

Financial contracts that represent a portion of the standard S&P futures contracts, making them accessible to more investors due to their smaller size.

Listed Price

The official price at which a security is traded on a stock exchange.

Futures Contract

A standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, used as a financial instrument for hedging or speculation.

Mini-Dow Futures

Futures contracts based on the Dow Jones Industrial Average but with a smaller contract size, allowing for more accessible investment.